Wednesday, July 27, 2011


      On the Tuesday, July 26, 2011 edition of MSNBC's Rachel Maddow Show, Dr. Melissa Harris-Perry, a professor of political science at Tulane University in Louisiana, filling in for Rachel Maddow, gave an extraordinary analysis of a new Pew Research Center report on the wealth gap increase between whites and blacks.
       Factually it is a stunning report, but Prof. Harris-Perry makes it even more so in her extraordinary analysis, reprinted below for your study.
        I've also embedded the MSNBC video from that night for you to watch her brilliant presentation.
        I found her analysis gripping, and worthy of consideration.
         If you feel this piece worthy as well, then please pass the link along so that others can gain the same knowledge and insight.



According to a new study out today by the Pew Foundation, almost a third of Latino households and more than a third of African-American households have either no wealth or negative wealth, which is to say debt. A third of households in communities of color in this country are living with their own personal debt crisis, complete with their own personal debt ceiling—or maybe we can think of it as a wealth floor, a floor they just fell through.

So while John Boehner laments whether Social Security will be around for his two daughters, he seems unaware that he has a country arresting on an American citizenry that‘s individually and in their household, not just in terms of what‘s happening in their government, but in their households, the people are experiencing tremendous debt. And we are relying on these people as wage earners and wealth creators, and we will continue to do so.

Within a few decades, we will be a majority minority country. Right now, roughly a third of African-Americans and Latinos are facing personal debt crises. And those who have accumulated a little wealth are perilously close to losing the small amount they have.

The immediate, right around the corner future of America is a colorful fun, and these people on the bottom of the chart, they are the ones that should be the future job creators, but right now they have no savings, no cushion to sustain them as they would try, for example, starting a business or hiring workers or implementing the new ideas that have always distinguished America.
According to the Pew study, the wealth gap—the distance between white Americans, Latinos, and blacks—is at a record high.

The midlevel white American family is worth 20 times its African-American counterpart, and 18 times its Latino counterpart. That‘s one dime in a black or Latino household for $2 in a white household.
Now, let‘s be really clear. The wealth gap is different from the income gap. Yes, jobs matter, there‘s no way families can pay their debt or begin to save if they don‘t have jobs. But this wealth gap is also fundamentally driven by public policy.

People didn‘t end up in these circumstances just because they were making bad choices or being irresponsible fiscally.

We end up with a wealth problem like this because of choices made by our own government. Initially, many black people in America cannot own property because they were property. Even after becoming citizens, many were shut out of the post-World War II policies that created an American middle class.
Black veterans in the South were denied benefits under the G.I. bill. In the 1940s, 65 percent of black workers were concentrated in agricultural or domestic work and were, therefore, unable to take part in Social Security.

And the discriminatory implementation of FHA loans meant that few people of color have the opportunity to buy homes in thriving neighborhoods.

And here is a deal with—wealth. It grows. It mushrooms, it explodes. And if you are shut out at the beginning, it is nearly impossible to catch up later on.

Take this example, if your parents didn‘t own a home because they couldn‘t get in because of the FHA discriminatory behaviors, then they can‘t take a home equity line to help you pay for college. So, you‘ve done the right thing, but you‘ve earned your way to college. Well, you‘re going to have to take out a student loan.

And now, you‘re starting adulthood with debt. Get a job, if there are some, and you make payments on the student loans. But you have no money left over for a down payment, so you rent. Even when your income rises a bit, it‘s hard to generate and create wealth.

But if your parents were able to buy into a house with those low-interest federal loans, if they did tap that equity to help you pay for college, then you start with no debt, and maybe your parents can help out again with a small down payment on your first home and you start building wealth and the outcomes are so very different.

Whole communities cannot just earn their way out of a wealth gap.

So let‘s look at that issue of housing just a bit more. Listen, predatory lending began in black and Latino communities a decade before it was common practice in American mortgage industry. Remember, we know a value of a house has less to do with how many bedrooms it has, or what the square footage it is, or whether it has granite countertops.

The main difference in the value of a house and whether or not that house is an asset that can create wealth for you and your family is, of course, location, location, location. And the number one locational problem for black folks and Latinos is they live in neighborhoods defined as bad neighborhoods, and they are defined as bad simply because black and brown people live there.

Residential segregation may no longer be the law, but it is a reality in much of the country. So, when this particular housing crisis hit, it double compounded what had already been true for African-Americans and Latinos for so long, making those housing prices fall even more rapidly, causing foreclosures to shoot up and making it even harder to buy into the American Dream.

So, here now you have a system where these groups are being pushed farther to the margins and these are the people, as we‘ve just seen over the course of the last decade, lose massively whatever small foothold they‘ve been gaining. They‘ve been hit hardest by unemployment, we see wages go down, they‘ve been hit hardest by the decline in wealth, they‘ve lost income, and now, they are the ones that are going to have to pay into our national treasury, pay into our Social Security system.

And as people of color become a proportionally bigger part of the American population, our national coffers will rely on them even more. We cannot pay off the national debt if households cannot pay off their personal debt, and if they are in debt, then you can‘t cut enough to ever make it possible to fix our government‘s debt problems, and particularly not if you refuse that one group whose wealth is still tick, tick, ticking up.

Joining us now to talk about this is Dr. Thomas Shapiro, the Pokross cross professor of law and social policy at Brandeis University and director of Brandeis Institute on Assets and Social Policy. 

Dr. Shapiro, I am such a fan of your work, thank you so much for joining us this evening.

THOMAS SHAPIRO, BRANDEIS UNIVERSITY: It‘s my pleasure to be here, thank you.

HARRIS-PERRY: So, from what we‘re seeing right now, listen, those on the right and a few on the left love to make this comparison between households balancing their checkbooks and the government having to tighten its purse strings. How dangerous is that metaphor?

SHAPIRO: I think it‘s an extremely dangerous metaphor. I think there‘s no way around the fact the latest Pew Center report that the American population is in absolute crisis if we look at the wealth loss for nearly all households simply from the year 2005 to the year of 2009. It‘s been an absolute wealth loss for everybody, and that means we‘re talking about what the opportunities for the American Dream in the future are for everybody.
Within that, however, the dynamics that have hit communities of color and low and moderate income communities, clearly the crisis is much more devastating. And that‘s why this pew report, I think, is really—I don‘t want to call it an alarm bell, all the alarms in the city, town, should be crying out about the severe crisis that we‘re in. 

HARRIS-PERRY: Dr. Shapiro, one thing I like most about your work is that you point us towards structural reasons for this. Your work really talks about how public policy is at the root of so many of these disparities.
So, if public policy helped to create these problems, what, if anything is Washington doing to help the disparity now?

SHAPIRO: That‘s a great question. I think if we get a really good handle on what‘s driven the increase in the racial wealth gap in the United States, then we start to have some tools and some handles on public policy that we might be able to make a redress of that particular racial wealth gap.
In my mind, at this point, with the Pew Center report, clearly, the biggest driver of the increase in the last few years has been the absolute utter crash of the housing market and the foreclosure crisis. And I think there‘s a lot that Washington has not done in terms of financial regulation that put some kind of control, some kind of transparency in the business that was going on, first in communities of color, and then spreading out through other segments of American society.
I also think that Washington could take a much harder look at what has been, in my estimation, a very anemic policy around foreclosures in the United States, a way we can help families who are in crisis, those families that look like they could make it through and make their payments or trying to make their home mortgage payments, I think there‘s a lot we can do for them.

HARRIS-PERRY: There‘s one other piece, the question of government and housing, and that is the issue of taxes. Look, in our current conversation, we keep talking about taxes as though they are just about income taxes. But talk to me a little bit about how our current tax structure actually widens this gap, makes this problem worse?

SHAPIRO: I think when we look at institutional dynamics like public policy, in my mind, the largest driver in terms of tax policy are the tax benefits given to families to behave in certain ways. There‘s what I call a wealth budget in the United States tax code, where individuals and families are rewarded by paying lower taxes for doing things that we think is good public policy for everybody.
The largest of those, of course, is the home mortgage interest deduction. The second largest one happens to be the taxes that we don‘t pay if we put money aside for pensions when we need to retire. If we add up those—those budgets in the United States, what the taxpayers are paying for incentives so that some people don‘t pay taxes, it‘s about $400 billion a year.
Now, that $400 billion a year might mean one thing if it were distributed somewhat equitably. But the story is different, the top 1 percent of taxpayers receive 45 percent of the benefits of that wealth budget of the United States government. And if I can use the phrase “the bottom 60 percent” receives 3 percent of that.
I think in terms of policy and in terms of structure, that that is the biggest place to start with and, unfortunately, politically, also the hardest place to start.

HARRIS-PERRY: Well, might as well have the hard answers in the middle of this manufactured crisis.
So, Dr. Shapiro, I greatly appreciate you taking the time to come and talk about this with us. Thomas Shapiro is the Pokross professor of law and social policy at Brandeis University—thank you so much for being here.

SHAPIRO: Again, my pleasure.


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